Black Sea agriculture commerce tilts in Russia’s favor after one yr of struggle in Ukraine

Russia’s share of trade in the international agriculture markets has risen one year after it invaded Ukraine, with the country’s wheat and sunflower oil exports overshadowing slowing Ukrainian volumes, an analysis of trade data by S&P Global Commodity Insights showed.

Ukraine’s wheat exports have slumped by more than a third in marketing year 2022-23 (July-June), while its sunflower oil shipments are hovering near a five-year low as its seaports were virtually shut over March-July 2022.

While trade has resumed after the UN-brokered Black Sea Grain Initiative in the second half of 2022, trade flows have shifted, with Ukraine’s exports to Asia tumbling as it shipped higher volumes of sunflower seed, wheat, and corn to the EU via land.

Russia and Ukraine are the world’s major grains suppliers, accounting for 27% of wheat, 15% of corn, and 74% of sunflower oil exports.

Here’s a quick run through of how trade, infrastructure, and prices of wheat, corn, and vegetable oil have changed since the Feb. 24, 2022, invasion of Ukraine.

Trade flows
• Ukraine’s wheat shipments have dropped 39% to 10.8 million mt so far in MY 2022-23, as Russia increased its export taxes, according to data from the Ukrainian agriculture ministry.
• S&P Global analysts have pegged Ukraine’s MY 2022-23 wheat exports at 13.8 million mt, down nearly 27% on the year.
• Ukraine’s wheat exports mostly stalled for weeks after the invasion. But exports picked up after the Black Sea Grain Initiative was signed in July.
• Ukraine’s wheat exports have realigned due to the war, with outflows to Europe increasing over 10 times, while shipments to Asia and Africa falling between 75% and 80%, data from the ministry showed.
• Ukraine’s MY 2023-24 wheat exports are expected to fall to 12 million mt, according to S&P Global analysts.
• Russia, the world’s largest wheat exporter, has seen a strong export campaign in MY 2022-23, shipping 24.9 million mt of the volume over June 1-Dec. 31, about 3.2 million mt higher on the year, data from trader sources showed.
• S&P Global analysts estimate Russian MY 2022-23 wheat exports at 41.5 million mt, against 33 million mt in the previous year.
• Russia’s wheat exports are expected to fall to 40 million mt in MY 2023-24, according to S&P Global analysts.

Infrastructure
• S&P Global analysts project Ukraine’s MY 2022-23 wheat production at 21 million mt, against 33 million mt in the previous year.
• Ukraine’s wheat output has come under pressure as the war adversely affected farmland and destroyed farm equipment, trade sources said. S&P Global analysts forecast Ukraine’s MY 2023-24 output falling to 16.8 million mt.
• S&P Global analysts have projected Russia’s MY 2022-23 wheat harvest at 91 million mt, up from 75.2 million mt estimated a year ago.
• S&P Global analysts project Russia’s MY 2023-24 wheat crop at 84.6 million mt.

Prices
• Platts, part of S&P Global, assessed Ukraine’s 11.5% wheat FOB prices at $274/mt Feb. 23, down 23.2% on the year.
• Platts assessed Russia’s 12.5% wheat FOB prices at $298/mt Feb. 23, down 17.4% on the year.

Trade flows
• Ukraine is a leading global corn exporter. The US Department of Agriculture has estimated Ukraine’s MY 2022-23 corn outflows at 22.5 million mt, down from prewar levels of 26.98 million mt in MY 2021-22.
• So far in MY 2022-23, Ukraine has exported 17.41 million mt of corn, down 7% on the year, according to Ukraine’s agriculture ministry.
• The EU’s grain imports from Ukraine have surged over the last year after the block abolished customs duties on Ukrainian goods to help the country fight Russian aggression, analysts from S&P Global said.
• In MY 2022-23, the EU imported 7.89 million mt of the grain from Ukraine, up from 4.9 million mt a year ago. Ukraine has emerged as the biggest corn exporter to the EU, surpassing top supplier Brazil.
• An influx of the Ukrainian grain into the EU has led to a drop in corn prices within the bloc and caused a discontentment among domestic farmers and traders. “The discontent that started on a farmer level is now reaching broad official discussion and could have more meaningful consequences for Ukrainian grain trade,” S&P Global analysts said.

Infrastructure
• The USDA sees Ukraine’s MY 2022-23 corn production at 27 million mt, down from 42.13 million mt the previous year.
• Ukraine’s agriculture ministry has said that total sown area for MY 2023-24 will decline 7 million hectares, from the prewar 29 million hectares.
• The ministry has said that Ukrainian farmers would be able to utilize just 50% of fertilizer and seed volumes in the current season due to high prices and low availability, further exacerbating supply issues.

Prices
• The most actively traded March futures contract on the Chicago Board of Trade was at $6.75/bushel Feb. 23. Corn prices on the CBOT rose to $7.16-$8/bushel over February end-March 2022 and peaked in April 2022 at $8.3/bushel.
• Black Sea corn export prices have also declined from a year earlier, with Platts assessing FOB Black Sea corn at $253/mt Feb. 22. A day after the Russian invasion Feb. 25, 2022, FOB Black Sea corn was assessed at $343/mt, with prices peaking March 11, 2022, at $387/mt.

Trade flows
• Ukraine’s sunflower oil shipments are set to hit a five-year low in MY 2022-23. The US Foreign Agricultural Service in its monthly oilseeds report Feb. 9 projected the shipments at 3.85 million mt.
• Argentina’s sunflower oil exports to the largest vegetable oil buyer India rose in MY 2021-22 (November-October) in the absence of Ukrainian volumes, data from the Solvent Extractors’ Association of India showed.
• Sunflower oil is the world’s third-most traded vegetable oil after palm and soybean oil.

Infrastructure
• Ukraine is the world’s biggest producer of sunflower oil followed by Russia. The two countries accounted for 60% of the global production in MY 2020-21.
• The US FAS forecasts Ukraine to produce 4.3 million mt of sunflower oil in MY 2022-23, down from 4.64 million mt a year ago, while Russia’s production is expected to grow to 6.19 million mt during the year, from 5.82 million mt a year earlier.

Prices
• Platts assessed Ukraine FOB Black Sea sunflower oil at $1,000/mt Feb. 22, down from $1,480/mt Feb. 23, 2022. S&P Global briefly stopped publishing sunflower oil prices right after the invasion because of unavailability of market data.
• Black Sea sunflower oil prices surged above $2,500/mt in March 2022 as the Russian invasion scuttled Ukraine’s port trade completely.
• Crude palm oil prices had also climbed during the same period as the world’s largest producer Indonesia tightened palm oil product export rules to reign in rising domestic food prices.
Source: Platts